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Keeping Internal Auditors Up to the Challenge

If the scope of your job were to widen dramatically tomorrow, would you be prepared? A recent study by Forbes Insights, in association with EY, “Matching Internal Audit Talent to Organizational Needs,” explores the ever-evolving role of Internal Audit, the group tasked with providing internal expertise in evaluating and improving effectiveness of risk management and corporate governance processes.

It sounds like a pretty hefty expectation already, but it’s one that’s likely only going to grow. Executives in our study report expecting more from their Internal Auditors. Indeed, Internal Auditors are increasingly expected to serve in a more strategic capacity; 28% of executives in the Forbes Insights/EY study said that Internal Auditors currently play a strategic role, but 54% expected the role of “strategic advisor” to become the Internal Auditors’ primary mandate within the next two years. That’s a pretty big role expansion.

And one that organizations have to prepare their auditors for. If you’d been historically expected to focus on issues of compliance and evaluating governance and risk management preparedness, and now you’re being asked to drive business and strategic insights, would you feel prepared? Or would you want your organization to help train you – and your team – for success? It’s a little like asking a heart surgeon to operate on a brain. The baseline medical knowledge is there, but I’m not sure I’d want them touching my head without some additional training.

Executives seem to be growing more aware of the risks their companies are facing. While 47% of executives said their companies currently complete a separate emerging risk assessment – enabling them to stay in front of new challenges that may be emerging – that proportion is expected to increase to 72% in the next two years. Additionally, while 27% said they were already heavily involved in identifying, assessing and monitoring emerging risks, 54% expect to be more heavily involved in the next two years.

And what are the risks that executives are anticipating? Well, mostly technology focused, unsurprisingly. The news has been filled with headlines recently about hacking, cyber attacks and company IT breaches, and the executives in the Forbes Insights/EY study seem to recognize the threats here too: of the top five emerging risks currently being tracked by respondents, three are related to IT risks.

But tracking risks does not security make, and monitoring them doesn’t make someone an expert either. In fact, some skills executives view as most important in helping to assess and managerisks are also the areas in which they know auditors currently have the least competency: data analytics, fraud prevention and detection, and general risk management, to name a few. Put simply: there’s a disconnect between what’s expected of Internal Auditors, and what their areas of expertise are currently required to be. And that disconnect is only going to grow as Internal Auditors are expected to take on a more strategic advisory role in the near future.

So how can organizations bolster their Internal Audit resources? Internships are one option to cover staffing shortages or gaps in expertise; these positions can also serve as a trial period as a precursor to becoming a full-time hire. Other, more creative approaches can also be useful, including guest auditor and auditor rotation programs, in which their Internal Audit team can take tap into expertise available elsewhere in the company. It’s an elegant solution: companies already have experts at their disposal, and it’s a relatively clear-cut step to allow Internal Auditors to learn from that experience and gain a broader perspective of the business or build expertise in a specific area. And then there’s the added benefit of strengthening Internal Audit’s relationships throughout the organization. It’s easier to manage risk when colleagues know you exist and don’t think you’re the enemy. A full 77% of executives in the Forbes Insights/EY study already use either a guest auditor or staff rotation program, with most rotations lasting more than 6 months.

But what happens when the need for a specific skill set isn’t an ongoing one? It can be tough to build the right skills quickly enough, and equally tough to commit to a permanent hire for a short-term project. Other options for bolstering Internal Audit expertise and shortening the disconnect between needs and skills include outsourcing and co-sourcing some Internal Audit capabilities, an approach that 82% of executives use. The added benefit here is that it can be more cost-effective: companies can scale up or scale down as needed, or bring in resource with a specific area of expertise for discrete projects, rather than hiring a permanent position they may only need for one or two temporary assignments. These types of talent may bring a fresh perspective or the experience of working with other clients to the table, and there’s less of a learning curve when a seasoned professional joins the team.

Think of it this way: wouldn’t it be great to have a professional baseball player join your team for a few innings? You’d learn a few things, that’s for sure.

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